Wholesale U.S. power prices are broadly expected to drop in 2023 as the cost of natural gas falls and cheap renewable electricity expands, government data and industry analysts said Tuesday.
Cheaper power has implications for U.S. industry struggling with rising inflation. The price that utilities pay for power could drop by more than a third in some regions after huge run-ups last year.
However, the lag between wholesale and retail pricing means ultimate consumers will not see any savings this year, analysts said.
Texas industry could experience the largest drop, a 45% decline to $42.95 per megawatt per hour, according to the Energy Information Administration. In 2022, the state saw hefty price run-ups during heatwaves, and this year is expected to add cheaper solar power.
"We're seeing a lot of build-out of solar generation in ERCOT (Electric Reliability Council of Texas) in the populated zones where the load centers are," said Rob Allerman, senior director of power analytics at data provider Enverus.
Overall, wholesale U.S. power prices will decline by 10% to 15% this year, estimates researcher Rystad Energy. Consumption could fall 1% in 2023 and then grow by the same amount in 2024, the EIA forecast. Electricity generation is expected to follow a similar trend.
Wholesale price drops will not reach homes and businesses this year "as utilities price-in last year's surging prices on a time lag," said Eli Rubin, an analyst at consultants EBW Analytics Group. Residential retail rates could rise 2.5%, according to the EIA.
Most of the growth in U.S. power generation will come from renewable sources, with utility-scale solar and wind gaining, the EIA said.
Regions where prices are rising include California and New England. California faces a nearly 6% increase, EIA data showed. It will pay more due to natural gas storage capacity restraints, Allerman said.
New England, which relies heavily on natural gas for power and heat but lacks gas pipeline capacity, could suffer as new power generation capacity is delayed at the same time electrification boosts demand, said Rystad Energy analyst Ryan Kronk.
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